The purpose of this project is three fold: (i) to describe the extent to which employers provide insurance coverage for alcohol and drug abuse treatments, mental health services and offer employee assistance programs, (2) to better understand why employers offer alcohol abuse treatment coverage, and (3) to better understand why only selected states have enacted legislation requiring group insurance coverage of alcohol abuse treatment. There has been almost no study of the extent to which employers offer substance abuse coverage or the content of that coverage. This study uses 1988 to 1989 Health Insurance Association of American (HIAA) and 1986-1988 Bureau of Labor Statistics data to describe trends in coverage and differences in coverage between self-insured and third party insured employers and to the interaction of coverage for alcohol abuse, drug abuse and mental health services. Self-insured firms are of interest because they can avoid mandated coverage. Because of newly available data the study is able to examine coverage provided by small firms and by state and local governments. The study is also able to examine newly available data on the services covered and the extent of cost sharing and service limits included in the plans of medium and large size firms. To better understand why firms offer coverage, the project develops a variant of the Goldstein-Pauly (1976) model of group health insurance. The model is able to address questions of (1) the role of enhanced productivity and worker preferences, (2) the effect of differences in tax rates, (3) the effects of state mandates for coverage and self-insurance, (4) the effects of unions and (5) the interplay of alcohol abuse coverage with other coverages. The model is tested by econometric methods using, primarily, 1989 HIAA data. State legislation requiring the provision of alcohol abuse coverage in group health insurance plans is a strongly advocated policy tool to reduce barriers to care. Yet by 1988 only 28 states had adopted such laws. The final study in this proposal uses the work of Peltzman (1976) to develop an economic model of the demand for legislation. The model argues that enactment is a function of the interplay of gainers (those "in-need" and health care providers) and losers (insurers and employers). The empirical analysis uses a variety of secondary sources to examine historical enactment and the propensity of states to enact or rescind legislation in 1989.